U.S. to Allow Hughes Satellite Deal for China : Technology: Company removed encryption ability, easing Administration fears. The sale means jobs in California.


The Clinton Administration indicated Monday that it is preparing to clear the way for Hughes Aircraft Co. to export a communications satellite to Australia for eventual launch in China, withdrawing its longstanding opposition to the sale.

For the past seven months, the State Department had opposed the export of the satellite on grounds that it would violate economic sanctions barring the transfer of high-technology equipment from the United States to China. But Secretary of State Warren Christopher, shifting ground, said Monday that the Administration will now process Hughes’ license “promptly and briskly.”

“Just recently, the Hughes company has been reconfiguring that satellite, and we believe that makes it now eligible for a Commerce Department license, which means that it would no longer be subject to sanctions,” Assistant Secretary of State Winston Lord told reporters. “So it looks like that particular problem between us and Australia will now disappear.”

The decision will be of considerable economic importance to Los Angeles-based Hughes, whose chairman, C. Michael Armstrong, last fall intervened personally with President Clinton to warn that the sanctions against China could cause serious damage to his company and lead customers to buy European satellites.


“It escapes me what effect our laying off 4,000 to 5,000 more people in California and shifting the export business to Europe has on the Chinese,” he said at the time. The figure Armstrong used for the layoffs covered two Hughes satellites--the one for Australia and another that was already approved by the Administration in January.

Dave Shea, a Hughes spokesman in Washington, said Monday that the company would have no immediate comment on the State Department’s new willingness to go along with the sale, whose dollar value has not been made public.

The U.S. reversal amounts to a goodwill gesture to the Australian government, which had complained that the sanctions, while directed against China, were unintentionally harming Australia. The disclosure was made shortly before Christopher landed in Canberra for meetings with Prime Minister Paul J. Keating and other top Australian officials.

The U.S. action also helps China, which will profit by launching the satellite for an undisclosed fee. The announcement comes four days before Christopher is scheduled to land in Beijing for meetings with top Chinese officials.

However, Christopher maintained Monday that the Administrations’s decision to permit the sale of the satellite “was not a particular favor we are doing for China. It was simply something that was consistent with our law and served our commercial purposes.”

Even if helping China was not the intent of the Administration’s action, the effect is to further undercut the impact of the sanctions against Beijing.

Those sanctions were imposed in August after U.S. intelligence agencies concluded there was hard evidence that China had been supplying Pakistan with parts and technology for its new, highly accurate, solid-fuel M-11 missiles. Pakistan is believed to have the ability to make nuclear warheads, which arms control specialists believe might be delivered with these missiles.

A 4-year-old U.S. law requires the imposition of sanctions against any country that violates the international regime restricting the sale of missile technology. When the United States imposed the sanctions, the action held up the export of seven satellites, all of which had been planned for launch in China.


Officially, those sanctions remain in effect. But in January, after considerable internal skirmishing, the Clinton Administration decided that two of the satellites were not covered by the sanctions and could be launched in China because those satellites did not give China access to any advanced or sensitive technology.

Monday’s announcement about Hughes now opens the way for the third of the seven U.S.-built satellites China is planning to launch.

Australia’s Optus satellite--owned by a consortium of seven private Australian firms, BellSouth Corp. and Cable and Wireless of Hong Kong--will provide commercial service for the Australian Broadcasting Co., civil aviation and pay TV in Australia.

The satellite is supposed to replace one that blew up in an aborted launch in China’s Sichuan Province in 1992. As originally planned, there were also apparently some military uses for the Australian satellite, which contained encryption technology.


Top State Department officials contended that the decision to clear the way for the satellites had been made only after Hughes itself agreed to remove valuable encryption technology embedded in the satellite.

It was this change in approach by Hughes, they said, that permitted the State Department to go along with the sale. U.S. officials had wanted to ensure that China did not gain access to the encryption technology.

“It’s not as if the U.S. is relaxing any sanctions,” Lord said. “This has been in the works for some time. . . . It’s got absolutely no policy significance.”

However, the decision surprised the Australian government. Only last Thursday, an Australian diplomat in Washington told The Times he detected no change in the State Department’s longstanding opposition to the satellite sale and expected that the issue would come up during Christopher’s visit to Canberra.


U.S. officials said Hughes resubmitted a new license application for the satellite to the Commerce Department late last week, only a day before Christopher departed on a trip that will take him to both Australia and China.

“I understand they have dropped the encryption aspects of it, so it will now be processed,” Christopher said in Australia.

Under existing procedures, the Commerce Department must still give final approval to Hughes’ application. But the Commerce Department has strongly supported the deal, and it is the State Department’s objections that have held up the sale of the satellite.